Car insurance prices 'falling at record rate'

Cars 'No-win, no-fee' cases are now more expensive to pursue

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The cost of car insurance is falling at a record rate in the UK, according to the insurance arm of the AA.

The average annual comprehensive car insurance quote fell to £594.84 this month, it said, down 9.8% from £659.53 last July - the biggest decrease since the AA insurance index began in 1994.

It said the dip was thanks, in part, to clampdowns on fraud and restrictions on claims management companies.

Despite the fall, premiums remain much higher than they were six years ago.

Third party, fire and theft quotes also fell between July 2012 and this month - down 4.8% to £820.58 on average, AA Insurance's research suggested.

BBC business correspondent Joe Lynam said the 9.8% fall in comprehensive cover quotes follows a 6.4% fall over the course of 2012 - itself a record.

But he adds that the cost of insuring the average car is still twice as much as it was in 2007.

Gender equality

At the start of April, a ban on referral fees was introduced.

Insurance premiums are far higher than they were in 2007

They were paid by lawyers and claims management firms to breakdown firms, brokers and the insurers themselves, in exchange for providing information about accident victims.

Also, anyone suing for accident damages with the help of a no-win, no-fee lawyer - known as a conditional fee arrangement - now has to pay their lawyer's success fee from their own funds if they win their case.

It was previously added to the bill of the losing party.

This has made claims more expensive to pursue.

And new gender equality laws have lowered premiums of men by far more than expected while women's premiums have remained static, according to AA Insurance's research.

Fraudulent claims - especially for whiplash which is often difficult to disprove - are also down.

AA Insurance director Simon Douglas said insurers previously faced "a fast-widening gap between premium income and claims costs - largely driven by whiplash injury claims and fraud, which saw very sharp premium increases between 2009 and 2011".

"That gap is closing and premiums are falling again thanks to competition, as well as improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims," he said.

'Treated unfairly'

"The news that hundreds of rogue 'no-win no-fee' claims firms have been reined in is welcome and, in part, falling insurance premiums reflect that."

Graeme Trudgill of the British Insurance Brokers' Association said uninsured driving costs the industry £500m, whiplash claims £2bn and fraud £1bn.

But these costs were now coming down, he added, because of a concerted effort by the industry, with "discounts now feeding through to policy holders".

Justice minister Helen Grant said: "We are turning the tide on the compensation culture which has pushed up the cost of insurance for drivers, schools and business - and taking another important step to reducing the cost of living for ordinary people."

Earlier this month, City regulator the Financial Conduct Authority launched an investigation into insurance companies for overcharging customers when they renew their car and house policies.

The FCA says automatic renewal can lead to customers being treated unfairly.

BBC Radio 4's Money Box revealed in March that loyal customers often pay much more than new ones for insurance.

The insurance industry says consumers can shop around for the best prices in a competitive market.


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  • rate this

    Comment number 104.

    Having worked in the insurance industry, I have to say that there is an appalling lack of knowledge spouted by many of the postings.
    The insurance market does a reasonable job although ALL insurance seems expensive until you have a claim. Remember, that the biggest claims that the insurance industry pays out are for serious injuries often caused by uninsured drivers, paid for by insured drivers.

  • rate this

    Comment number 103.

    Surely a common sense way to insure cars is for the insurers to give back 95% of the premium you pay if you don't make a claim for that term.

  • rate this

    Comment number 102.

    84. swerdna
    "Get rid of claims management companies and you will get a further premium drop".

    Do some proper, in-depth research into how CMCs operate (or used to anyway) and you'll find that media bandwagon against CMCs was based upon propaganda, misinformation and lies designed to whip up a storm only for the benefit of insurance companies but to the detriment of genuine claimants.

  • Comment number 101.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 100.

    If as the insurers bleat there was little money in the job there would be less companies how often do we see yet another company appear.

  • rate this

    Comment number 99.

    Aaah, something for the workaholic zombies to talk about during dinner parties. - what can we blame the scroungers for this week...

  • rate this

    Comment number 98.

    Insurance companies are blatantly ripping people off. Here in Germany we pay €288 fully comp. Its just come Down €5 per Month. Rip off Britain at its worst.

  • rate this

    Comment number 97.

    Motor insurance rates go up and down each year like yoyos.

    It has little to do with claims experience and everything to do with balancing risk in insurer's portfolios and good old price competition.

  • rate this

    Comment number 96.

    So it is time to play;

    "hands up if you said the Euro ruling thingy about not charging more based on sex was going to cause everyone's insurance to go up" so that you can admit you were wrong....

    ....but I don't suppose many of the knee jerk, reactionary little Englanders (or as the Tory Chair would [allegedly] have it "swivel eyed loons") will actually admit that they were wrong.....

  • rate this

    Comment number 95.

    @16. not reassured
    " Its time the insurance companies stopped fleecing their existing customers to subsidise discounted introductory policies.

    Especially when the admin costs for signing up a new customer are greater than retaining an existing one.

    Beat them at their own game, jump ship every time your renewal is due and they will soon stop punishing loyal customers.

  • rate this

    Comment number 94.

    "Why is the government not subsiding insurance costs for those on income support?"

    Doyle, I placed the giro cheque somewhere where you would never find it - under your work boots!

  • rate this

    Comment number 93.

    Just renewed my car insurance 1 week ago, current supplier could not match the other 108 companies from my internet quotes. I didn't choose the cheapest from £170 fully comp. when going through the internet sign up they added extras, I chose one that gives fully comp as it is supposed to be, nothing extra to pay and included break down cover, all for £220 - £140 cheaper than my renewal quote.

  • rate this

    Comment number 92.

    82. gman70
    No claims or accidents and my premiums still go up
    Do you stick with the same provider year on year? I can only speak for myself but every year my quote has come down, mostly because I don't make claims and change my provider every year.

    Sticking with the same provider is a sure fire way to get shafted, much like gas and electricity suppliers shaft those that don't switch.

  • Comment number 91.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 90.

    The correct title for this article would read: 'Car insurance prices still unjustifiably high'.

  • rate this

    Comment number 89.

    All very well lowering costs, but if you are involved in an accident the insurance companies pay out is pathetic and it takes a lot of work to get a decent amount of money from them for the value of your car.

  • rate this

    Comment number 88.

    Could Entitlement Doyle post his/her address and bank details here? That will let those of us who pay for his/her lifestyle to send on the balance of their salaries. Let's cut out the middleman!

  • rate this

    Comment number 87.

    After years driving in the Andes mountains I returned home with no NCD.
    I insured a small car with an agent of "big company "A" for £799 in 2011.
    The following year I went to the "big company" directly - they wanted £1100 for the same insurance.
    I tried another company and got it for £540.
    I don't want the £225 saving offered by
    The whole industry is CORRUPT.

  • rate this

    Comment number 86.

    @65 nasara
    As a car/motorbike driver, I am also aware of bad/reckless/incompetent pedestrians. The ones who dash across the road in front of you when there's a crossing 20 metres away. I've also noticed a compulsion in supermarket car parks. They will rarely walk in front of you when you are moving forward slowly, but will always walk behind you when you are reversing.

  • rate this

    Comment number 85.

    All insurances should be optional

    If you have an accident that is your fault, and you don't have insurance,and can't afford the costs,it should come out of either your:

    Home (if you own one)
    Home contents (flat screen etc)
    or if you have neither,your benefits.

    I've been driving for 16 years and have never had an accident that was my fault. God knows how much I've paid to my insurance companies.


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